Legislature(2007 - 2008)HOUSE FINANCE 519
04/04/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB422 | |
| HB314 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 314 | TELECONFERENCED | |
| + | HB 422 | TELECONFERENCED | |
| + | SB 196 | TELECONFERENCED | |
| + | TELECONFERENCED |
1:53:18 PM HOUSE BILL NO. 422 An Act repealing the Alaska children's trust; establishing conditions for a grant to a named recipient of the balance of the Alaska children's trust; designating certain receipts as available for a grant to a named recipient for child abuse and neglect prevention; and providing for an effective date. BECKY ROONEY, STAFF, REPRESENTATIVE PEGGY WILSON, explained that the Alaska Children's Trust (ACT) was established in 1988 with the goal to improve the status of children in Alaska by generating funds and committing resources to eliminate child abuse and neglect. The initial appropriation was made in 1996 in the amount of $6 million dollars. At present time, ACT funds total nearly $12 million dollars. The ACT Board is established in the Office of the Governor and receives grants and support from the Department of Health and Human Services. A portion of the interest from the earnings, funds grants to community-based prevention programs and services. The dollars available for annual grant making are limited to a maximum amount by State statute. Ms. Rooney pointed out that Trustees of the Alaska Children's Trust (ACT) & the Board of Directors of Friends of the Alaska Children's Trust (FACT), the 501(c)(3), a non-profit organization established to raise funds and advocate for the mission of the Alaska Children's Trust, have engaged in activities to assess the effectiveness of the Trust in accomplishing their mission, while planning for the future of the Trust including how FACT can help accomplish the mission. The ACT and FACT boards have determined that: • Under the current structure, FACT is unable to accomplish the primary purposes, which are to raise funds and advocate for the Alaska Children's Trust. Donors do not want to make contributions to the State, because FACT is not able to guarantee that the donor intent is honored. The FACT directors are not willing to raise money that may or may not be used as the donors intend. • Unless significant changes are made, the current administrative structure of the State's Trust does not allow for reliable, stable budget funding for the grant-making process. • Given the Trust's small operating budget and the size of the grant awards, many community based organizations that are well poised to offer community-based solutions are unlikely to apply because of the administrative burden relative to the small size of the grant awards. 2:02:16 PM REPRESENTATIVE PEGGY WILSON, SPONSOR, supported the comments made by Ms. Rooney. Representative Thomas inquired if the bill would make the Trust into a 501(C)(3). Ms. Rooney responded that it already has that status. 2:03:03 PM PANU LUCIER, EXECUTIVE DIRECTOR, THE ALASKA CHILDREN'S TRUST, noted that she was new to the position and serving under the direction of the two boards, ACT & FACT. She addressed the issues that affect both organizations and the State's ability to administer funds for child abuse prevention and neglect. The Office of Children's Services (OCS) statistics for March 2008 indicate that over 2,000 children are in out-of- care home care of which 61% are Alaska Native or American Indian. The impact of child abuse and neglect goes beyond the child and family. Society as a whole pays a price in terms of direct and indirect costs. Direct costs include those associated with maintaining a child welfare system to investigate allegations of abuse and neglect, as well as expenditures by judicial law enforcement, health and mental health systems to respond to and treat abused children, estimated costs of $24 billion dollars per year. Ms. Lucier continued, indirect costs represent the long- term economic consequences of child abuse and neglect such as juvenile and adult criminal activity, mental illness, substance abuse and domestic violence. She anticipated as those children diagnosed with Fetal Alcohol Spectrum Disorder (FAS) become parents, there will be an increased demand and need for support services. The State has taken the responsibility of providing services to children already suffering from child abuse and neglect. ACT is currently charged through State statutes to conduct activities which result in the prevention of abuse through the issuance of community-based grants. Ms. Lucier pointed out that the current administrative structure of the Trust is burdensome because of the small operating budget and the small size of grant awards being offered. She thought that a more streamlined and simplified administrative structure could enhance the Alaska Children's Trust ability to efficiently pursue their mission. Ms. Lucier stated that privatizing the Trust would expand the role of the Trust from only grant making to also including research, convening, collaborating, outreach and social marketing, which could enhance the Trust's ability to focus grants in program areas that are of the highest need and would allow the Trust to share information through outreach and social marketing. She concluded that the Trustees of the Alaska Children's Trust with the support of the Friends of the Alaska Children's Trust recommend to the Governor and the Legislature that the Trust become privatized. 2:07:36 PM KAY KANNE, EXECUTIVE DIRECTOR, JUNEAU FAMILY BIRTH CENTER, JUNEAU, testified in support of the Trust becoming privatized. She believed that the Trust could be better able to receive more private donations from non- governmental entities and that the legislation could help to create a more streamlined structure. Ms. Kanne pointed out that the program utilizes education, support and health care at the Juneau Family Birth Center. She reiterated her support for HB 422, which would privatize the Alaska Children's Trust. 2:09:34 PM CARLEE LAWRENCE, CHAIR, FRIENDS OF THE ALASKA CHILDREN'S TRUST BOARD (FACT), ANCHORAGE, testified via teleconference, stated that the FACT Board unanimously supports HB 422. The mission for FACT is to raise money for ACT, the only funding dedicated solely to community based programs to prevent child abuse and neglect in Alaska. The FACT Board often runs into an ethical dilemma when attempting to get new donors for the Trust. The current ACT organizational structure does not allow FACT to honor the donor's intent. There have been potential donors that support the ACT mission, but are not willing to give money to a pass-through organization or to the State of Alaska. She maintained that there are dollars left on the table that could otherwise be provided to help prevent child abuse and neglect. 2:11:52 PM PUBLIC TESTIMONY CLOSED 2:12:16 PM Co-Chair Meyer MOVED to ADOPT Amendment 1, 25-LS1552\E.1, Kurtz/Mischel, 4/4/08. Vice-Chair Stoltze OBJECTED. Representative Wilson explained that the amendment would change the department which prepares the agreement. Currently, it is handled through the Department of Commerce, Community and Economic Development, but would move to the Department of Health and Social Services. The Department of Commerce, Community and Economic Development would continue to provide the grants to the recipients. Vice-Chair Stoltze WITHDREW his OBJECTION. There being NO further OBJECTIONS, Amendment 1 was adopted. 2:13:42 PM Co-Chair Meyer asked if the amendment would impact the two fiscal notes. Representative Wilson explained that the note to Department of Commerce, Community and Economic Development would remain zero but would change the negative note from the Department of Health and Social Services to one that was less negative. Co-Chair Meyer interjected there would be a forthcoming new note by the Department of Health and Social Services. Representative Crawford indicated his support for the Alaska Children's Trust to separate and become privatized. 2:15:43 PM Representative Hawker commented on the description of rust" as an enterprise or administrative activity. He suggested that the second discussion [concern] should address the actual Trust, the monetary investments made to enable the administrative function. He believed that each section was separate from the other. He pointed out past inefficiencies in the management of the Trust. He anticipated a better structure to accomplish that mission. He agreed that privatizing could possibly get the work done better, which he did support. Representative Hawker worried about changing the actual management of the monetary assets. He proposed enacting the administrative management changes, but keeping the money under the State management trust. Representative Hawker suggested that the ACT administration could parallel how the Alaska Mental Health Trust works, as an agency that does not manage their own investments. 2:20:17 PM Representative Wilson reiterated that big corporations and foundations presently are not donating for fear that the Alaska State Legislature & the State of Alaska will tap those dollars. JAMES BALDWIN, ATTORNEY, FRIENDS OF THE ALASKA'S CHILDRENS TRUST (FACT), testified that the intent is that the Legislature designates the recipient of the $12 million dollars and makes a judgment regarding the Trust's ability as a non-profit corporation to make their own determinations. The new entity would become the Alaska Community Foundation (ACF). He pointed out that all the grants would be subject to some level of competitive. An investigation and review of investment abilities of ACF anticipates that it would provide the same or equal levels of skill at a lesser cost than those of State managers. 2:22:45 PM Representative Hawker advised that the uncodified law requires a reversionary provision that if something bad happens, the State receives the balance of the money back. He recommended finding an organization that is "the best at taking care of children and then vest the management with those quality managers and leave the money with the State. Mr. Baldwin said that would need to be a policy call for the Legislature to make. The bill establishes a structure with annual reporting to the Department of Revenue. There are reversionary powers that are often implied; he agreed that there is a clear right for the State to get the money back if something bad does happen. Representative Hawker asked the authority of the Department of Revenue to take proactive action. Mr. Baldwin advised that the bill clarifies who receives the reports; those powers are available in Title 37. Representative Hawker was not ready to accept that legal conclusion. He requested to see a copy of the grant contract, which would place $12 million dollars into public funds. 2:26:10 PM Vice-Chair Stoltze asked what was wrong with the current system. Representative Wilson hoped that the proposed change could generate more donations through privatization. She pointed out that the Alaska Mental Health Trust receives funding through a different structure and that they do not have the same complications as ACT. Vice-Chair Stoltze understood that most trusts carry similar responsibilities. He was not convinced of the need for the legislation, adding that $12 million dollars is a large investment. 2:28:50 PM Representative Gara acknowledged that the goal to address fund raising activities might only be met through privatizing. Representative Wilson acknowledged that was the main purpose. Representative Gara summarized concerns regarding dedicated donations. He asked how the State could get the money back if the contract was breeched. He pointed out the intent to manage the money as an endowment. He asked about projects that the State approves. Current language could be addressed on Page 3, Line 13, that the endowment is administered for statewide ACT projects. He proposed inserting language that the Commissioner of the Department must approve those projects, providing some State oversight. Representative Wilson responded that the State must prepare and execute an agreement with them as indicated on Page 3, Line 7, which Amendment 1 changes to the Department of Health and Social Services and describes the granting conditions. Representative Gara pointed out that the projects would continue to be left with the discretion of ACT, who would no longer have to consult with the State Advisory group. 2:33:36 PM Ms. Lucier explained that ACT's the Governor appoints the majority of the Board members and therefore, the State would continue to have oversight. The mission of ACT does not change. Representative Gara hoped to guard against the State being uncomfortable with where those funds are spent. The manner in which the bill is written, ACT must consult with the State Advisory group but does not necessarily have to follow there recommendations. 2:35:32 PM Representative Kelly asked if similar situations exist for the State. JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF REVENUE, replied that he was not aware of any similar situations. It is called a Trust but was set up through legislative authority. The concern rests with the donors. Currently, as established, it is an administrative problem & an investment issue for the Department. It is set up as a principle and income bearing account instead of as an endowment. The Department invests the principle for capital gains and growth and only the dividends and interest are spent. When the dividends and interest are earned, the funds are transferred to an income bearing account until the grants are made. There are no even cash flows. If the State decides to keep the Trust, the Department recommends changing it to an endowment. The key is the structure of the grant agreement and how the grant is designated in the capital budget for the $12 million dollars. Mr. Burnett recommended including professional oversight and added that the Department of Revenue is supportive of making the change. 2:39:31 PM Representative Kelly clarified that the actual amount of money available to the Trust is a spin-off from the $12 million dollars. Mr. Burnett explained that under the current statutory scheme, $150 thousand dollars of the principal from capital gains could be spent for administering the fund and only dividends and interest can be spent for grants. Representative Kelly asked if the Trust would have access to the corpus. Mr. Burnett stated that under HB 422, the community group would receive the entire $12 million dollars and would be required to manage it as an endowment, spending only a set percentage. He stated that the Department would no longer have control because the money will be in private hands. 2:41:13 PM SAMMI POKRYFKI, FACT BOARD MEMBER, ANCHORAGE, testified via teleconference, echoed the comments made by Mr. Burnett. She added, that because the Trust is currently not managed as an endowment & only the interest & dividends are available for grants, it is an unpredictable grant amount from year to year. It is difficult to maintain prevention programs and keep them going. The donors have concerns that their donations would not be going where they ultimately want them to go and that it is difficult to raise money for the Children's Trust because of the issue. 2:43:55 PM Representative Crawford supported establishing a structure that allows the Trust to determine the way the funding is spent. He agreed with concerns voiced by Representative Hawker regarding the State managing the financial responsibility for the Trust. Representative Hawker addressed concerns regarding the inconsistencies of the available dollars under the current statutory scheme. He pointed out that HB 160 would change ACT to an endowment. 2:47:05 PM Representative Gara supported the language of the bill, acknowledging concerns voiced by Representative Hawker and Representative Crawford. He pointed out that the group believes that they are deficient in their ability to raise money and that there are no other alternatives for addressing that except through the legislation. Ms. Lucier interjected that the FACT Board has been informed that it is unethical to raise funds as a professional board when the donor-intent can not be guaranteed. The FACT Board has decided, if the Trust is not privatized, FACT will dissolve because they can no longer continue to fund-raise. If the Board does dissolve, ACT looses their ability to raise funds. She maintained that ACT helps to prevent more children from entering into the State system. 2:50:37 PM Representative Kelly asked if it would be possible to create a "floor" which the fund could not drop below, when allowing ACT to privatize. Mr. Burnett responded that as currently written, it requires annual reporting; the key is how the grant agreement is structured. He did not see any reason why that language could not be added to the grant agreement. Representative Kelly was satisfied with that. 2:52:01 PM Vice-Chair Stoltze suggested that the bill be held in Committee in order to draft a new committee substitute, before it goes to the House Floor. Co-Chair Meyer summarized the Committee's concerns and asked Mr. Burnett if the corrections could be easily be drafted. Mr. Burnett thought it could be addressed quickly including the addition of mentioned stipulations. Co-Chair Meyer requested that Mr. Burnett work with Ms. Armstrong to make any necessary changes. Representative Gara inquired about the oversight references, wondering if the Trust would dissolve. Ms. Lucier explained that the FACT Board intends to merge as one into a 501(c)(3) Board with the Governor appointing the majority of the trustees. Representative Gara asked about the current structure of the Board members. Ms. Lucier reiterated that all members are appointed by the Governor. Representative Gara questioned if any members were approved by the Legislature. Ms. Lucier stated that all members are approved by the Boards and Commission office. 2:56:34 PM Representative Hawker raised the point regarding the grant having their management vested in appointed individuals, and including a reversionary clause. He inquired if the result would be difficult for the Legislature's authority to appropriate. He requested testimony from legal counsel on the issue. JEAN M. MISCHEL, LEGISLATIVE COUNSEL, DIVISION OF LEGAL AND RESEARCH SERVICES, LEGISLATIVE AFFAIRS AGENCY, ANCHORAGE testified via teleconference, clarified that there is no clear answer to Representative Hawker's query. She stated that public trust funds have never before been transferred to a private group. She did not see a problem in terms of the legislative delegation. She clarified that the previous statement that the advisory group could function as trustees of the Trust, is not what the bill accomplishes. She noted that Page 3, Lines 9-10, clarify that the non profit acts as the trustee of the grant fund. Ms. Mischel recommended that "advisory group" be referred to as an advisory board. Nothing in the proposed bill establishes that board nor mandates that the Governor set up that board. The bill only provides the condition. Representative Hawker requested all technical recommendations in writing. 3:00:46 PM HB 422 was HELD in Committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|